What's the equivalent of foreclosure in the UK?

kevinqq

Silvertabby said:

silvercar said:

Silvertabby said:

jimjames said:

kevinqq said:

Find it amazing what happened and I really hope no one is thinking of repeating it.  Bubble education needed, and sub prime warnings to be heeded. 

History does repeat itself although slight differences each time "It will be different this time" doesn't always work out.

You've mentioned 2008 as I guess it's closer to your memory but 1989-1990 was a far worse situation. Negative equity was a problem for at least a decade after that.

A friend bought a house in 1987 after a bit of a bidding war.  She tried to convince me to do the same, as 'prices will just keep going up, and if I didn't do it then I'd never be able to get on the property ladder'.  Fortunately, I'd just been posted to an expensive housing area and so couldn't afford to buy, even with a 120% Northern Rock mortgage.

Then came the crash, and my friend was plunged into negative equity.  She didn't lose the house because she was could still afford to pay her mortgage, but it was a good 10 years before the house value exceeded the remaining mortgage.  Negative equity was only a problem if you had to sell or remortgage, so many - like my friend - were able to weather the storm.  

For those moving up the ladder, the drop in prices was an opportunity not a storm. We sold in early 1993 for less than we had paid in 1988, but it meant we could afford a bigger property than if prices had risen.

We bought our house, as first time buyers, in 1994.  Because prices were still flat-lining after the crash, were were able to afford our forever home - 4 bed detached - and are still happily here in our retirement.

Not planned, just got lucky.  

Lovely to hear  (read)

kevinqq

Personally I wouldn't tax the rich as in rich people, as they can leave.  I'd tax big corporations and close down tax loopholes and heavens.  The corporations cannot leave in the same way an person can)

Could we not have a "Tax heaven act" which would cover EVERY single way a tax heaven is used above a certain amount?    (not interested in some individual saving a few hundred quid)

kevinqq

ACG said:

If your house is valued at £100k on the open market and you owe say £60k. 
The lender will repossess and they may sell through an estate agent or at auction.  In those cases they may only get say £90k. 

Chances are you wont be paying the mortgage or any interest from the point of repossession to the point it sells. Interest will be added to the balance, it will go up faster due to the effects of compounding. 

In addition there will be legal costs added to the £60k and estate agents/auction fees. 

Once all is said and done, the debt might end up being £75k. in which case, the bank gets £75k, you get £15k. 

If the person who had the house repossessed had sold the house before it got to that stage, they might have got the full £100k or at least closer to it. They would not have had the legal fees added and they would likely have sold it a whole lot quicker. In which case they might have walked away with £30-35k. 

I was interviewed by a paper last week funnily enough and this came up in conversation. I dont think what happened in 2008 will happen here now. After 2008, the FCA (or maybe the FSA as it was) brough in income caps of 4.5x income. That meant people were unable to stretch themselves as much and so the chances of ending up with a mortgage that they cant afford is slimmer. Even in 2023 with the mini budget these changes I think protected a lot of people from being hit too badly. 

Unfortunately the govt and FCA and rolling back on these income multiples to make it easier to get larger mortgages. So down the line you could find 2008 happens again as govt does not learn. But if 2008 was to happen tomorrow or next year, I think most of the market would be able to weather it. 

Can you explain the bit in bold please?  Why does the borrower get that back?

user1977

kevinqq said:

ACG said:

If your house is valued at £100k on the open market and you owe say £60k. 
The lender will repossess and they may sell through an estate agent or at auction.  In those cases they may only get say £90k. 

Chances are you wont be paying the mortgage or any interest from the point of repossession to the point it sells. Interest will be added to the balance, it will go up faster due to the effects of compounding. 

In addition there will be legal costs added to the £60k and estate agents/auction fees. 

Once all is said and done, the debt might end up being £75k. in which case, the bank gets £75k, you get £15k. 

If the person who had the house repossessed had sold the house before it got to that stage, they might have got the full £100k or at least closer to it. They would not have had the legal fees added and they would likely have sold it a whole lot quicker. In which case they might have walked away with £30-35k. 

I was interviewed by a paper last week funnily enough and this came up in conversation. I dont think what happened in 2008 will happen here now. After 2008, the FCA (or maybe the FSA as it was) brough in income caps of 4.5x income. That meant people were unable to stretch themselves as much and so the chances of ending up with a mortgage that they cant afford is slimmer. Even in 2023 with the mini budget these changes I think protected a lot of people from being hit too badly. 

Unfortunately the govt and FCA and rolling back on these income multiples to make it easier to get larger mortgages. So down the line you could find 2008 happens again as govt does not learn. But if 2008 was to happen tomorrow or next year, I think most of the market would be able to weather it. 

Can you explain the bit in bold please?  Why does the borrower get that back?

That's their equity in the house. If you sell voluntarily at £100k, repay the £60k mortgage and have say £5k of selling expenses, you end up with £35k.

And the same applies to a repossession, except the mortgage bit will also have the payment arrears and all of the lender's costs for litigation, marketing, lawyers, eviction, house clearance, insurance, etc, so there'll be less left (and more often nothing).